While the steeply upwards curve of global trade and finance that once characterised the last few decades may have flattened since 2008, it has not reversed the advances made by globalisation. The new era of digital globalisation has brought on an extraordinary phenomena of rapid transmission of information and innovations, that has broadened the scope of global economy.
The term ‘digital economy’ first appeared during the 1990s and has evolved since with the simultaneous evolution of the changing technology, and its usage by businesses and consumers. In the recent years, this particular definition became centred on the diffusion of technology, products, techniques and services across economies. This has come to be known as digitalisation. The advent of digital platforms has had a critical impact on the economics of how business is being done internationally by reducing the cost of economic interactions. This has even enabled smaller enterprises to become ‘micro-multinationals’, including start-ups, 86 per cent of which have been reported to have utilised cross-border markets.
The concept of digital economy has special significance when it comes to developing economies where investments and policy interventions in digitalisation give a boost to not just the emerging economic sectors, but also the traditional ones on which the livelihood of most of the population depends. Hence, it is worth celebrating that, propelled by diminishing costs of smartphones, and their increasing availability, as well as government’s efforts to augment internet penetration in the country, India is one of the frontrunners in the advancement of digital economy.
Within 2021 itself, in the fourth quarter, there are 825 million Indian internet users as opposed to the 795.18 million at the start of the year, reflecting an approximate rise of 3.8 per cent. Indians’ contribution to digital products and services has also risen in parallel. In 2020, India constituted 14 per cent of the total 2018 billion app installations in the world. As a consequence, India has emerged as one of the biggest and fastest-growing digital consumer bases which is digitalising faster than many of the more mature economies of the world.
While the public sector in India has been the key catalyst for the country’s rapid digitalisation with initiatives such as Aadhaar, private sector innovations have also helped in expanding the scope of digital services. For instance, the strategy of clubbing almost free smartphone devices with service subscriptions by Reliance Jio led to a huge growth in mobile data access as well as consumption.
This rise in internet penetration and smartphone ownership has shown positive implications with respect to domestic e-commerce which is expected to reach INR 7 lack crore by the year 2024, almost doubling by 2027. The grocery and fashion sectors are the main drivers of this digital economic growth, wherein Indian retail already constitutes the largest industry in the nation, contributing to more than 10 per cent of the Gross Domestic Product (GDP), and 8 per cent of employment avenues.
Despite the rapid adoption of digitalisation through online payments, etc., it has been relatively slow in the case of Kirana stores, that form a major proportion of the retail industry. Out of more than 12 million Kirana stores that exist in India, only 15,000 seem to have adopted digitalised operations, restricting their integration into organised realm of retail. This results from not just people’s limited understanding of online transactions, but also from the fear of fraudulent activities.
In recent years, the private sector has made some pertinent efforts in addressing these challenges to India’s digital economy. One of these is the $ 10 billion initiative announced by Google in 2020 called the ‘Google for India Digitisation Fund’, Google also partnered with Jio’s platforms to promote development of more affordable smartphones for consumers. Amazon has also invested $ 1 billion to integrate 10 million small as well as medium enterprises online by facilitating their transition to online platforms, along with provision of warehouses, cataloguing, imaging, etc. The integration of WhatsApp (Facebook) and JioMart (Reliance Jio), post the outbreak of the COVID-19 pandemic, has also attempted to do something similar by allowing consumers to get groceries from neighbourhood stores with the help of a mere WhatsApp text.
Online transaction platforms such as Google Pay, PhonePe, Paytm, etc., have also enabled smaller businesses to access multiple payment options in the form of digital wallets, QR code-based and Unified Payments Interface (UPI). In addition, other firms such as OKCredit, Jumbotail and KhataBook also aim to extend support with respect to ledger accounting, inventory management and supply chain management. DuNOW is another online application that helps in generating digital bills, manage customer communication, etc., while SnapBizz focuses on being an easy solution to Goods and Services Tax (GST) compliance for Kirana stores in particular.
While the private sector has had a significant influence on the retail sector, there is still great scope for further intervention. The initiatives so far have been focused on the one-directional transition of retail stores from physical to digital. However, in order to build a truly resilient and digitally transformative economy, there is an urgent need to direct attention towards convergence of the physical and the digital. This means bridging the effectiveness of interpersonal relationships with the efficiency of technology, thus augmenting consumer experience in maximum possible manner.
In addition, the private sector needs to extend its horizon beyond the retail sector by also embarking on large-scale partnerships in the newly digitalising sectors such as agriculture, financial services, logistics, etc., increased integration of which will be critical in furthering growth of digital economy in India. For instance, it has been noted that it is possible for farmers to reduce cost of production by 15-20 per cent just by using data regarding soil conditions, enabling then to use minimal fertilisers. Similarly, shippers can reduce 50-70 per cent of their turnaround time if they are able to track their vehicles in real time. To supplement these digital infrastructural developments, there is a need for greater investments in skill and capacity building of the relevant workforce.
The Digital India initiative by the government has presented immense scope for the private sector to make use of the programmes such as Aadhaar to access public data sources that can be used to better understand the need of the people, and improve on or create new goods and services accordingly. With the increasing focus of the government towards creating a nurturing regulatory environment to safeguard privacy of citizens and labour market evolution, all scales of private sector enterprises can expand their business with ease, without much resistance.
Therefore, it is crucial for higher private investments to enter the space of digital economy as only then will it be possible for the funding to enter pertinent areas of development in a multiplied manner. The private sector, thus, with the help of the fostering policy environment created by the government, needs to harness technology in an inclusive manner. Such advances also have substantial potential of bringing India closer to achieving the Sustainable Development Goals (SDGs) by the years 2030, contributing to bridging the gap between under-digitalised and hyper-digitalised countries, leading to a more just and equitable future.
This article has been authored by Radhika Sharma and Karishma Sharma.